15 February 2010
MGM Advantage warns that retirement income is set to fall
dramatically and the industry must work to develop a new breed of
annuity products to help retirees cope.
The retirement income specialist said the conventional annuity
will become less attractive and increasingly redundant for many
people in retirement. It estimated that £135bn of pension
funds will mature in the next five to ten years and that new
retirement income solutions are needed to maximise this money's
potential.
MGM Advantage said there are three key factors that mean
retirement income levels are falling. These are the growing switch
from defined benefit to defined contribution pensions, increased
longevity and regulatory changes.
It also said Solvency II could be bad news for those approaching
retirement as it may force insurers to increase the capital they
hold. This would impact annuity rates, with estimated falls of
twenty per cent.
